it's bouncing nicely. >> 2.5%, just thaereabouts. farmer jim? >> i mentioned transocean earlier. the thing you're looking for is 1/3 of their fleet that is in cold stack status. you're looking for announcement of those rigs getting on line soon. >> all right. i'll see you on "closing bell." "the exchange" begins right now. ♪ ♪ thank you very much, scott. and welcome to "the exchange." i'm kelly evans, and ahead this hour, the major stock story of the day, arm shares jumping about 17%, 18%. the biggest ipo in a couple of years. the first print was $56.10, about $5 above where it priced last night. that values the company at just under $62 billion, and that's still down from the $64 billion softbank had valued the company

when it took full stcontrol jus last month. we have full team coverage. leslie picker is at the nasdaq for us. david favor is fresh off his interview with softbank and arm's ceo. and capital's dunkin davidson is here with first impressions and implications for the rest of the ipo market. leslie, let's start with you. a sigh of relief here, for sure. >> definitely a sigh of relief. this was priced at $51, it opened at $56.10, so that generated about a 12% pop at the open, and then higher from there. it's currently trading around $60 per share. so you take that and multiply by the total number of shares, which includes restricted stock options, that gives you that $64 billion valuation that softbank had that transaction where they acquired the remaining stake in arm they didn't already open

from their vision fund back into softbank. so kind of interesting psychology there. could be more coincidence than anything, but as we look at this deal on a price-to-earnings basis, this one is not coming cheap. in fact, it's quite expensive, about double that on a relative value. and it's also coming in at a discount at $64 billion, just last month. and then there were reports earlier in the year that said they would be targeting up to $70 billion per valuation. so came below there, and they were able to, as a result of some of that psychology, some of the marketing, orchestrate a decent open today which should bode well for the other ipos in the pipeline. obviously, this is an idiocyncratic situation. but you don't want to' other deals go down, because that leaves investors with losses on their hands with less of an appetite to buy future deals. so if they are sitting nicely

today, they may take a look at some of these other ipos on the road. >> absolutely, leslie, thank you very much. this may tell up as much about softbank as it does about arm or tech or the ipo market. and earlier today, the ceo sat down with david favor. so david, people love to hear from massa. still, he has to feel good about how this offering has gone off so far, because it looked a little more dicey a day or two ago. >> without a doubt. what i have heard is they could have potentially priced above the range at $52. he was given that option, chose $51, seems to have been a good decision given the after market performance thus far, kelly. of course, as leslie made clear, softbank still owns 90% of this company, so they are benefiting from that significant rise in value today, almost equaling, again, what they paid, not very long ago to take their ownership stake from what had been 75% to

100% at that $64 billion value. of course, one key question from here will be, well, what do you do now, massa, are you potentially a seller in the future of some of that 90% position? here's what he had to say. >> our intent is to hold as much as possible, as long as possible, and wanting to keep 100% of arm, only reason we have having ipo is because arm is such an important company for the industry. i wanted to have investors to have the opportunity to participate on the upside opportunity of arm. >> kelly, he was being generous with allowing the public to participate in the upside opportunity, which he believes -- a lot of it is attached to the promise of ai, the chips that will power it and that arm intends to be a key

component of all of those chips, made by the likes of nvidia, for example. so that is part of the growth story here. the market seems to be a believer. >> and i'm just kind of going back and looking at some of the headlines about softbank. twilight of an empire is one that jumps out. they had $32 billion in losses last year. we know that 2022 was a terrible period for tech, for the markets. but 2023 in the first half was a very different story. i'm curious how you would perceive the financial position of softbank today and the need to unload any further investments as it's already paired back dramatically in an effort to raise cash. >> what it's really paired back is what was once a significant ownership in one of the greatest investments of all time, that being alibaba. but the vision fund has not performed to the level hoped for in terms of the first vision fund at $100 billion and the second one. we all know the problems that

have taken place in the private markets and the high valuations paid. we know the mistakes made there, certainly with softbank being the single largest sponsor. also, 4 1/2 years ago was the last time i sat down and talked to masa. it was a different time, but he was speaking incredibly enthusiastically about his vision for the future, namely about ai. it is interesting, kelly, that they didn't execute as well on that vision in terms of their investment portfolio as you might have thought, right? chatgbt for example, or any number of the companies that have come along with such an important wave of generative ai. that said, masa is fully on board. he believes that the investments that he's made will prove to be quite profitable in what he still believes is the future for ai, that will involve it gaining general intelligence. what he said to me, it seems like he thinks it will be pretty

soon. >> listen, there could be many more chapters of this softbank story. david, thank you for joining us to talk about it. david faber. arm is the biggest ipo in years, but how much of a bellwether is it for the rest of the ipos waiting in the wing? joining me now is business editor at axios. since we were just talking about softbank, david, i want to talk with you. you're not all that impressed by what masa has been up to lately -- dunkin, sorry. but do you think that now that is out of the way, it shows that we cleared this hurdle, even for a listing that felt a little desperate. >> i must say i'm amused to say that a softbank risk in a stock, that's a new one. but i suppose it's sensible. this company, arm, is to smartphones what intel is to pcs.

it should be a core holding of most portfolios in tech. so i'm happy this thing is public. i don't think masa is going to sell. i think he can leverage his position to do other things, which is probably what his real plan is. i will say this, though, this ipo is normal. it goes off 10%, maybe 15%, 18%. that's a normal ipo. but it's not big pop. so i think we're all waiting for next week with -- what is it, the other one, to go public, to really see if this is a tech story now. >> very much, dan, kind of what you were saying. insta card becomes the next one to watch here. >> it's a name that fewer people know, because it's not a consumer name, it's marketing sas. but you have so many other sass companies watching. you know, leslie picker said something interesting.

she talked about how, you know, the fact that this one, arm, didn't get -- face major head winds was important. i think that's true. in other words, i don't think arm succeeding doing this normal ipo is tailwinds for others. but if it was getting crushed, you know, if it was now trading down at $40 a share or something, that would have g greeked out the others. >> and probably turned investors off. so it's clavio, but now that we know that the market can digest this mega ipo, instacart is much smaller. clavio, i'm not sure what size they are looking for, but does this entice stripe and others to say this is the window? >> it should. you have a lot of companies -- data bricks today, which is a privately ranked company, speaking to their ceo last night saying why haven't you gone

public? he said well, nobody has gone public. he didn't say we're scared of the market, but he wants to watch others. here we go. arm today, a couple next week. birkenstock isn't the same as a chip or ai company, but it reflects it and investors are willing to buy new issues. you can't wait too long when an ipo is open. you can end up with a drought. >> duncan, i was thinking about the instacart investors, private markets, who gave it that $39 billion valuation a couple of years ago. and it's now worth $9 billion. there is a lot of losses in silicon valley, or amonkeypox these private equity firm for others whose bubbles have burst a little bit. >> in general, it's much lower than a $39 billion valuation. so in most of these stocks, one of the problems in this era is it's taking so long to go

public. you are sitting on these things more than what you have done 25 years ago. so it's good to get out. >> that said, i guess the question i'm asking, are these muted ipos for the public markets, duncan, better for the retail investor than a hype cycle or valuation? i mean, the retail investor easily in 2021 would have been the ipo customer for instacart if they had chosen to go public. so it's almost like we have turned the tide here, where those taking losses in a muted ipo seem to be some of the later stage private investors and not so much the public. >> no question that delaying ipos and having them sell at bubble valuations is not good for the retail investor. they used to get in much quicker and make a killing. but now they're waiting. i think some of these stocks will show some of the pop we've all wished to see in tech

stocks. my only caution is this -- no matter what masa says, arm is not an ai story. most of the companies we coming out on the list are not ai stories. it may be that we don't see the hot market again until some of the ai stocks, which are brewing, get to go public. i think the retail investor will hop on those like they're hopping on or were hopping on nvidia. >> let me play a portion of the interview where he said he's all in on ai and sees a big opportunity forearm. take a quick listen. >> i believe in the future of ai, and it's really now getting proved. this is the beginning of big ai time, and arm is going to have a big role in that. >> and dan, the ceo's case was, you know, arm chips are used in sort of voice assistance and all sorts of different consumer

products that have -- they're stretching a little on the narrative here. >> that's the message. i spoke to the ceo this morning. he said twice to me, which is the catch phrase they used was "ai runs on arm." so they're absolutely playing this, but they have to. smartphone sales are down. there's huge questions about china in terms of export control, et cetera, and a lot of arm's revenue comes out of china. the ai story, that's the one part of the private growth stage market. arm is not a startup, but you are seeing valuations going up. i will say, somebody who covers deals for a living, i don't remember the last time i got a press release about a funding of any sort of company, and it does not matter. to be honest, i bet if you looked through the birkenstock ipo you could find it in there. >> gentlemen, thank you both for your instant reactions and analysis. duncan, quick last word? >> i will say this -- nvidia is

an ai story because big ai needs to buy gones of nvidia chips and systems. arm is not an ai story. apple talks about putting in a little smart watch, that's not going to drive demand forearm. that's just a feature in a device. arm is a smartphone device story. so let's not get confused. just saying ai will run through it doesn't mean ai will drive huge arm in growth, it won't. >> fair point. thank you both for joining us on this marquee day. if you as abinvestor were hoping to get exposure through the arm ipo through an etf, you could be up for disappointment. bob has that angle of this story. >> hi, kelly. ipo tech enthusiasts are excited about the arm holdings, and there's very good reason. it's the first big tech ipo in two years. but many of the most natural long-term buyers, these are etfs

are not going to be buyers immediately. most etfs track indexes that have strict requirements for inclusion. the largest index requires that a company be domiciled in the u.s. to be included, which arm is not. second, many indexes require that a company float at least 10% of the stock outstanding. but arm appears to be floating less than that, roughly 9.3%, which would leave it ineligible for inclusion in other etfs. this is the largest s semiconductor etf. one way around this problem is for the green shoe to be exercised, a 15% overallotment that is often allowed. we're waiting on word on whether that will happen. we don't know yet. one big potential buyer is the nasdaq 100. $ 200 billion in assets, and it

has no market cap or free float limit. that's good news and reconstituted in december. so watch that one for inclusion. another candidate for inclusion, ipo etfs, including the renaissance capital itf. but that has a relatively small market cap of $200 million. this is a big test. it needs to be successful. the average ipo this year was up 19% on its first day of trading, just like arm. after the first day, the average ipo down 7%. that's why these haircuts for instacart, very good news for investors. we need some of these early ones to succeed. that means they need to be up a few weeks after they go public. >> bob, thanks. joining us from the new york stock exchange. still ahead here on "the exchange," the consumer still has plenty of dry powder left to keep spending. that's the case my next guest will be making.

there's one particularly interesting trend when it comes to student loans. raymond james call thing restaurant stock underappreciated with best in p class margins. i had not heard of this one before. maybe you can guess it. the analyst behind the call joins us next. here's a look across a strong rally day in the markets. we haven't seen the dow up 343 in some time. that's good for 1% increase. nasdaq and s&p trying for their fourth positive session. and the russells are leading the way. ten-year yields back below $430. "the exchange" is back after this. this thing, it's making me get an ice bath again.

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welcome back. more hot inflation data today, calling into question the real strength of consumer spending lately. the consumer price index jumped 0.7% last month, the biggest gain since june of last year. retail sales, meanwhile, up 0.6%, above estimates. but how much is simply higher prices? joining me now is steve whiting from citi private bank and david tinsley from bank of america. great to have you both here. david, let me start with you, because you can unpack this a little bit. how much of the spending we have

seen in recent months, broadly speaking is just price increases? >> some of it is that. the retail is boosted by gasoline prices. but in our day, you see very strong service sector spending, as well. we need a balance sheet of the consumer. it's in pretty good shape, so i say some, but certainly not all. >> we spoke to liz, who says there is a huge debate. is it running out and we're about to face this trifecta of student loans, higher gas prices, or are we in a better situation than before? >> on the deposit side, up about 30%, 40% across all incomes. that looks solid. on credit cards, people aren't tapping their cards relative to their limits as much as they were in 2019. the utilization rates are still lower. so in the rounds, we think

there's dry powder still in the consumer. there are a few head winds, student loans as you say, but all manageable. >> how does that jive with your view on things and what is going on with the consumeer? >> it doesn't lend itself to a complete bust or boom view. it looks like a deceleration. you know, three years ago, we had an absolute depression in services employment. services employment rarely falls very much, even in recessions. >> right, very steady. >> so to get all that back is actually helping a lot. it's working through some of the problems we have in the good sector. we have manufacturing recessions, trade recessions, and we're getting inventories down because of this strength in services hiring. now, the whole thing is dpgrowi half as fast as it did, and it will continue to decelerate with these head winds, but it's getting us to a place where we

are not going to have that collapse when you have a full-blown drop in employment of a serious magnitude. >> so jobless claims, last week well, maybe distorted by labor day holiday. this week, again, very low. it doesn't seem like a seasonal issue, it seems like a cyclical tell. do you think it's an ongoing rebound in services -- how much longer does that have to go? >> the claims data, there's no sample, we love this data. but it's not showing the entire picture. when you look at job openings that vfallen by 2.6 million, an hiring is decelerating, so the net firing, or people being able to quickly find another job is still painting a picture of stability. >> i can understand why goldman is down 15% in the next 12

months. rates are kind of on a nominal basis are so much higher. >> yeah, i mean, behind all of this is the labor market strength. when you look at the lower income distribution, wage growth has been at the strongest. so that's driving, in a sense, the ability to borrow and the spending pitch. so, you know, there are corners of households, where people are feeling some stress, vis-a-vie, you know, borrowing, et cetera. but it's minor, i think. >> for now. so steve, final question then as it comes down to the fed, which is not expected to hike this month. y how does this shake out for them? >> so they've done a lot, and they're doing more with quantitative tightening. just take a look. not only is the fed reducing its

treasury holdings, but foreign central banks appear to be doing the same thing. and if you apply some legs here and the fact that employment growth is decelerating, you could say 187,000 jobs, that's still too many. well, where is it headed? if you look at next year, the federal reserve is probably going to back off of sort of a really ultratight monetary policy. it's not going to give us zero rates. but the whole point is they don't want to. we shouldn't need a collapse a few years after a deep recession. >> gentlemen, thanks. steve and david with stocks in a better mood these days. some marquee fast casual stocks have been under pressure since gasoline prices started to jump. shake shack down 24%, chipotle down almost 10% frr summer highs. but they are two of my next guest's top picks, along with this one, first watch restaurant group, that was our mystery

chart, up 40% this year. it focuses on brunch, and it's jumdz underappreciated with best in class margins. brian, welcome. i mean -- >> hi, kelly, nice to see you. >> is there a brand name for first watch that i would be familiar with? >> first watch is a little under the radar, but it's the leader in a category seeing tremendous growth over the last decade, this brunch daytime cafe c category, and some of that has come from other sectors, like dinner on the weekends, if you go out and have a nice meal and spend $60, i think that is stealing some share. i've done that myself every now and then. so first watch is an interesting growth story, 10% plus unit growth. 19% to 20% store level margins.

and it's one for growth investors to have on their radar. >> fascinating. apparently there's not one too far away from here. let's go back to some of the brands much more familiar. khalid shashkhalid shake shack is it all those things we have been talking about? >> there's always a lot to think about these days. restaurants has really deteriorated and softened up, and certain sectors have slowed over the last few weeks and into the early part of september. we are seeing some pockets of softness in the casual dining sector that are flat lining. the limited service sector is holding up, still in that positive mid single digit plus range, and just as your two guests were discussing earlier a few moments ago, there are

pockets of strength and weakness. it is difficult to get a read on the underlying health of the consumer. you mentioned chipotle, one we have liked for a long time. tremendous long-term growth history to it. but chipotle we believe is still generating positive traffic growth, which is rare these days within the restaurant sector and has obviously an unmatched long-term track record as it relates to economics, and is still only halfway through its north american growth curve. >> you're saying don't bail on these ones just yet. you also like brinker, are those the only names in a more casual space you would be looking? >> you know, as the macro is a bit murkier and we're seeing slowing comps on a year over year basis, i think things are

still relatively stable through the lens of multiyear same-store sale it is you looked back to 2019. so there's some variability there on comparisons. but one point, there's value ideas that are interesting, and also some growth ideas. we're really gravitating towards names with company specific drivers that can cut through the macro in our view. the two names you mention ed lie bloomen brand and brinker. there's not only opportunity on shareholder value through its brazil business and some of its ancillary brands. but you also have potential improvements. brinker, they are -- they have a new ceo who has been this for about a year, and they are pulling some meaningful leverage right now that we think will be able to drive outperformance at

the chiles brand over the next few -- say next 12 months or so. that includes a return to more normal advertising spend levels, which we have seen in recent quarters. >> baby back ribs. you make a great point about cutting through the macro with some of these plays as people are concerned about that environment. thank you so much. appreciate you joining us today. >> thanks so much, kelly. >> >> coming up, arrogance and greed? that's how nyu characterizes softbank's approach to pricing companies. and rent inflation showing no signs of slowing down last month in the big apple, but there might be signs of relief on the horizon. and take a look at the dow heat map with the index up 336

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spend countless hours volunteering to teach people how to reach their financial goals. it felt good. it felt like i could take on the whole world. the nasdaq climbs up towards a 1% gain, the s&p up 39. meantime, check out shares of the automakers. the big three, all lower with just hours until the dead hooin for them to reach a deal with the united autoworkers. and "closing bell" will be speaking with ford's ceo at 4:00 p.m. eastern time. coming up, the dow and s&p on pace for their best day since

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welcome back. some breaking news on hunter biden. tyler mathisen with the story. >> thank you very much. federal prosecutors have indicted hunter biden now on three counts tied to possession of a gun while using narcotics. two counts tied to biden filing an allegedly false form that he was not using drugs at the time he bought a colt cobra revolver in 2018. count three is that he possessed a firearm while using a narcotic. there are also two misdemeanor tax charges pending. hunter biden is yet to comment on this new indictment out in california. kelly, as we get more details, we will pass them along. turning back to the markets, the second half of this year hasn't been a great one. the s&p 500 up only 1% since jowl 1st.

and energy, one of the few sectors in the green. but my next guest says while today's economic environment is very complicated, stocks will make a comeback, and the first half laggards should continue to lead that charge. joining me now is david katz. david, welcome. energy is one of the areas you're talking about? >> energy has started to do really well. we think there are other areas that are better to make money than energy right now. oil, we think is at the high end of the trading range in terms of the price. while the stocks have done better, we think they're closer to the ceiling. there are lots of other things that have done poorly last year and have continued to do poorly this year. stocks that are down 10% to 20%, but have strong fundamentals and selling at 13, 14 times earnings. >> is that where paypal comes in? >> unfortunately, yes. p

paypal is down from 300 to 60 or 70. the earnings have come in, the revenues have been there, they have controlled cost. there's a new ceo coming on. but the stock has gone from 40 times earnings to 12 1/2 times earnings. we think if you have a 12-month time horizon, there's a likelihood this could be 50 plus percent higher. we think they're a relevant player, and they're doing all the right things. wall street is just angry at them and ignoring them entirety. >> you also like goldman, i believe morgan, blackstone maybe, black rock. but goldman in particular, you think they get a little fill from the ipo season we're in the middle of? >> they spoke this week and morgan spoke. both of them talked about a better 2024 pipeline. so, again, if you have the six plus month time horizon, you're getting a very good yield with goldman.

the surprise also be on the upside, and the stock has 10% to 20% higher from year. >> morgan, same thing. there are a couple of financials in here, and one of the sort of worst trades has been people trying to bottom fish in the regional banks, which it doesn't sound like that's what you are doing. >> well, today we're focusing on the goldman morgan. we like the real banks. a number of them spoke this week and the outlooks were good. we liked pnc. they talked about business being bi better than expected. we think they can navigate the commercial real estate area and you are getting a really good business at an attractive price. so you have to focus less on the next three months. 6 to 12 months, the stocks will be higher. focus on the best quality banks. >> we had great first half, but

you think the first -- we start to get some momentum back, but lock at the last four sessions out of five. the s&p is higher, i think. >> the market is skchizophrenic we know. we think as we go through the last month in the fourth quarter of this year, the market is going to focus on a better 2024 outlook. we think there are pockets of very reasonable valuation, driving the market higher. we think things will slow down. we like technology, but we don't think it's going to have a repeat of the robust gains it had in the first five months of the year. markets tend to be volatile. you have a great period, then a slowdown. we think it's going to lead to a better end of the year. >> david katz, no cuters today. >> no phone, and my quarantining area of the house, unfortunately. otherwise, all is quell. >> are you quarantining from someone else or are you the

patient? >> i'm the patient today. >> flashbacks of 2020. thank you for joining me. you seem like you're doing all right. so wish you well. >> thanks a lot. still to come, rents climbing yet again in august, with the average rent in new york still above $5,000 a month. but there are signs the record highs could soon start to cool, and we'll big into that, next. the flip side is the apartment reits. we'll get more details when "the exchange" comes right back. i did have hearing aids from another company... i was just frustrated... i almost gave up. with miracle-ear it's all about service. they're personable... they're friendly. i'm very happy with them. we provide you with a free lifetime of aftercare. meaning free checkups, cleanings, and adjustments.

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everbank brings security and a guarantee that you'll earn a yield in the top 5% of competitive accounts. going, that's what got you where you want to be. we're the partners for your next move. everbank. advantage, you. welcome back to "the exchange." another month and another record high for manhattan rents. new yorkers getting no relief in august, as inventory fell. but there could be signs of a top forming. robert frank joins us. higher than the last time we talked to you? >> affordable housing has always

been an oxy moron in manhattan, but the average relate is over $5500. median rents staying at record highs from july at $4370. inventory also fell 16%, meaning there was less choice for renters and more rev laj for land lords that like to hike rents. but the number to have new leases fell 14% over last year. august is usually the strongest month for rentals as families rent for back-to-school. this year, apartments were lingering on the apartment an average of 39 days, much longer than a year ago. landlords are renews with existing tenants with slight increases rather than seeking new leases. bidding wars accounted for 11% of leases. bidding wars for strongest for those two bedroom apartments.

nationally, rents ticked up slightly in august, but across the country, landlords are starting to make some concessions like maybe one month of free rent. but if you look at that cpi data from yesterday, most of that increase was due to shelter costs and the high rents. shelter costs up over 7% year over year. so that's still the big driver of the cpi. >> what we have often talked about is this glut of apartment supply coming to the apartment. are we expecting a lot of supply to hit the new york market or not? is that one reason why it's more sticky? >> we're not, and that is the big issue. that's why rents may not go up much, but they're probably going to stay at this elevated level. the only hope for new supply is this new airbnb law, which makes it harder to rent airbnbs, could agree up some of that inventory back to the full-time market. but that's 5,000, 10,000

apartments, but not a lot of new construction that will be rentals. new construction are very expensive condos. >> so we also have spoken with some developers who say the cost of conversions from office is so high and the incentives aren't great enough. >> it's prohibitive. changing those giant office buildings to functional apartment buildings is so expensive. we seen it in san francisco, but we haven't seen the price for office buildings come down enough in new york to make the conversions worth it. >> robert, thank you, as always. coming up, the tv business almost on the brink of implosion in recent weeks with the disney charter spat. and in hollywood, the writer/actor strike is still going on. the media industry needs to take a hard look at the music business as a cautionary tale. and the big story of the day,

the arm ipo. shares are still trading just above $60 after opening at $56, pricing at $51. "the exchange" will be right back. crepe corrector diminishes wrinkled skin in just two days. gold bond. champion your skin. that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy.

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welcome back, everybody. arm is trading above $60. $9 above where it priced and about $4 where it opened today as its first day as a newly public company. masa son telling david faber earlier the only reason for the ipo he wants to give investors the opportunity to share the company's wealth. my next guest warns about that saying softbank is a hype machine that pumps prices with arrogance and agreed and that $54.5 billion valuation for arm is reasonable if they can get a 40% annual compounded growth rate. what will the first two days mean for ipos coming down the pike like instacart and birkin stock. joining me is aswath damodaran professor at the nyu school of business. sounds like you're not in the ipo? >> i'm a not in the arm ipo, but i think that -- i mean, this is not 2021. in 2021 i wouldn't be surprised if arm went for $100 billion.

there's hype but a reality this is a true a.i. play and money-making company, a company that figured out a way to make money. there is a plausible path to today's stock price. my only red flag one reason i would hold back, i'm not sure i want to touch anything that softbank has already touched. one thing we've learned over the last three or four years is softbank doesn't have a soft touch when it comes to building businesses. i would want to avoid anything softbank tells me to buy. >> they're still in -- i was going to say make the argument, but they are in control, only floating 9% here. >> i think they're still in control and that might be the reason i hold back, is maybe let arm be run by the people who built the company up, i would have more confidence in the company. masa should not be the spokesperson from the company. >> let me ask you about instacart because we're going to

go there next. valuation $9 billion, down from $39 billion. again, in 2021 this could have been a $50 billion or more listing. you know, you might say well, it's best growth days are behind it. that was going to happen anyway. did you want to get in at a $50 billion valuation or 9? >> i think the reality is online grocery retail can never be like online retail in other spaces. you're never going to get 100% gross retail. you would be lucky to hit more than 20% online. that puts a ceiling on how much growth you can get for an online grocery intermediary. the grocery business is not a very profitable business. there's not a lot of fat to share here. it was always a company bounded. in 2021, people forget the bounds and in 2023 i'm glad to see that they're recognizing those bounds. in fact, when i look at the pricing of $9 billion they're building in the presumption that instacart will lose market share of the online grocery retail business and that its stake will

drop. which i think is realistic and grad to see reality win out here. >> just to back up for a second, this is actually a much better ipo environment for the broad public or do you think ipos in general are something people should be wary of? >> i think it is much healthier because i think people are asking the right business questions rather than pricing questions. pricing questions what will other people pay for this? people are asking decent questions about businesses, and i think that's always good. because i think we need companies to be put on notice that they need to build business models. >> speaking of, you know, what businesses should be worth, what do you do with media? your analogy to the music industry doesn't calm my nerves. >> i think there's a lot of existential trade in movie and broadcasting companies now because you can see what stream asking to the music business. it devastated it. the collective revenues from music dropped by 40% between 1998 and 2015. it's come back a little, but the

business has been remade. it's a very different business with the existing, the status quo pretty much gone. if you're a movie or broadcasting company wondering is that going to happen to us? i think the movie and broadcasting businesses are more resilient than the music business. there are lessons from the music business that might apply here. the status quo will get challenged. it already is. part of the reason you saw the meltdown in disney's market cap over the last year in addition to all of its company specific problems people are looking at the future saying i don't know how this business will evolve with streaming being the dominant way in which content gets out to consumers like you and i. >> right. studios imploded only a handful are less. 1% of musician are 90% of streams. i guess i have to be taylor swift or that's what it's going to take in the next iteration to come here. so i remember when we talked a little while ago and netflix was

the only kind of mega cap tech stocks you were bearish on and this fits with your warning for some time. what do you do with the rest of mega cap tech now? what would you do with nvidia? it's only 35 a times forward earnings? >> people ask me that all the time because i have quite a few of those big techcompanies still in my portfolio and tell them the truth, which is, if you ask me whether i would buy them at today's prices? my answer is no. i got lucky enough to buy them at much lower prices and tells you how we treat stocks that are already in our portfolio differently, even though we should not. stocks that we haven't bought yet. so at today's prices you're paying premium prices for all of these companies. they're great companies. put that on the table. but you're paying for the companies to continue to be great and that's often not a great investing bet. great can become very good and that's a negative surprise. >> when you sell them i want you to come on here and let us know.

we'll know we reached the next point in this. thanks so much for your generous time today. really appreciate it. >> thank you for having me. >> nyu's aswath damodaran. that does it for "the exchange." next on "power lunch" with hours left until the deadline to avoid an auto workers strike live to detroit for the latest on the negotiations. tyler is getting ready and i'll join him on the other side of this break. s change the world. ♪ opportunity is making the dream of home ownership a reality. ♪ ...and driving the world forward to a greener energy future. [applause] sometimes the only thing standing between you and opportunity is someone who can make the connection. at ice, we connect people to opportunity. (sirens) [due at target in 5!] copy that. make a hard left down the alley. network's got you covered. [please confirm requesting back-up.] -changing route. -go. roadblock ahead.

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you founded your kayak company because you love the ocean- not spreadsheets. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire and welcome, everybody, to "power lunch." alongside kelly evans i'm tyler mathisen. a lot of news to get to including a looming strike by the united autoworkers union if they don't get a deal by midnight there could be targeted strikes as soon as tomorrow. judge big the comments by both sides they don't seem close at all. another las vegas casino company hit by a cyber attack.